12 questions lodged at 2022 ZIP AGM

November 3, 2022

Here is the text of the 12 written questions lodged at the 2022 ZIP AGM which was a fully virtual meeting held on November 3.

1. The ZIP chair, Diane Smith-Gardiner, was a prominent supporter of Josh Frydenberg's proposed proxy adviser regulation last year, which the Senate over-turned 3 days after it commenced. Does she still believe the system needs legislative or regulatory reform and did she think there were any flaws in the Frydenberg model?

Answer: Diane pointed out she was quoted in The West Australian describing the laws as an "over-reach". Well, yes, but that was after the Senate had rolled Josh and she was still backing regulatory intervention.

2. Did any of the 5 main proxy advisers - ACSI, Ownership Matters, Glass Lewis, ISS and ASA - recommend a vote against any of today's resolutions, including the remuneration report? Which of the proxy advisers are covering us and has their been a material proxy protest vote against any of today's resolutions? Will you disclose the proxy votes before the debate on each resolutions so shareholders can ask questions about the reasons if there have been any protest votes? Also, why not disclose the proxies to the ASX with the formal addresses like others now do?

Answer: there was some objection to items 4 and 6b.

3. Co-founder Peter Gray is a top 20 shareholder with 15.5 million shares which is great from a skin in the game point of view. Could Peter please detail the history of his ZIP shareholding, including whether he has ever sold any shares or participated in the latest capital raising. Also, are their any margin loans over these shares and, if so, is the position fully disclosed to the chair? Could the chair also comment on how director and executive margin loan disclosures are generally handled internally.

Answer: I've only sold about 10% of my shares and was buying on market recently to support the stock. Chair said no margin loans although sounded a bit like Zip not having lent Peter Gray money on his stock, as opposed to Commsec or any other third party funder.

4. Could co-founder Larry Diamond please comment on how much ZIP has lost on bad debts over the years and what he thinks the trend will be over the next few years. Isn't credit risk the ultimate problem with the buy now pay later model and the fundamental difference with credit card providers which take no credit risk.

Answer: $228 million was written off last year but they are working to hard to get the default rate down below 2%.

5. Could auditor Mark Lumsden please comment on why he didn't push for bigger write-downs as at June 30 this year given that even after this year's $658 million full year loss, our claimed net assets of $1.142 billion are more than double the current market capitalisation of $451 million. Could the chair and CEO also both comment on what aspects of our book value they believe the market is not currently recognising. Surely, if the share price doesn't recover, we'll need to take another big write down in the first half of 2022-23. If that happens, are there any credit risks that would emerge in terms of our solvency ratios with lenders.

Answer: As usual, the auditor just said the accounts were drawn up in accordance with the accounting standards.

6. Larry Diamond is our largest shareholder with 55 million shares. Could Larry please detail the history of his ZIP shareholding, including whether he has ever sold any shares or participated in the latest capital raising. Also, are their any margin loans over these shares and, if so, is the position fully disclosed to the chair? With such a large shareholding, could Larry comment on whether he really needs this new incentive grant to remain motivated?

Answer: I've only sold 10-15% of my shares over the years and there is currently no leverage on them.

7. Afterpay was the world leader in the disruptor play known as buy now pay later. How have they changed as a competitor since the Square-Block takeover completed last year? Are they a more or less formidable and aggressive competitor now that Twitter founder Jack Dorsey is in charge of Afterpay. Does Larry agree that Dorsey grossly overpaid for Afterpay which never reported a profit as an ASX listed company and was arguably simply a sophisticated share selling scheme in a fundamentally flawed market segment given the credit risk inherent in the BNPL business model.

Answer: Afterpay has not changed as a competitor since the Dorsey takeover and we still believe in our business model.

8. The ZIP annual report claims we have a massive 121,000 shareholders. Given the market capitalisation has crashed to $450 million, the average holding is only worth $3719. Surely we should be launching an offer to take out tens of thousands of unmarketable parcels as a cost saving measure. How many of these 121,000 shareholders have provided an email address and signed up for online communications?

Answer: We'll consider this.

9. The voting turnout of just 22% is remarkably low for an ASX300 company, suggesting that more than 70% of the company is owned by our 120,000 retail shareholders, the vast majority of which haven't bothered to vote today. When disclosing the outcome of Meredith Scott's election and all other resolutions today, could you please advise the ASX how many shareholders voted for and against each item, similar to what happens with a scheme of arrangement? This will provide a better gauge of retail shareholder sentiment on all resolutions and was a disclosure initiative adopted by the likes of Metcash, Altium and Dexus last year and Webjet and Tabcorp so far this AGM season.

Answer: We'll consider this.

10. Peter Gray just said that he chose to offer himself for re-election. Is that reference to the fact that CEO's don't have to be elected and he could have asked Larry to run the gauntlet instead. Has Larry ever been elected as a shareholder?

Answer: Yes, Larry doesn't have to be elected as CEO.

11. Given the interesting discussions across a range of topics today, could the chair undertake to make an archived copy of the webcast plus a full transcript of proceedings available on the company's website to that any of the 121,000 shareholders who weren't watching online, can catch up with the debate later? The likes of Nine, AGL, ASX, ANZ, Domino's and Lend Lease all produced their 1st AGM transcripts in 2021. Will you follow suit today? This is something IAG has been doing since 2003.

Answer: We'll consider this.

Final question and thanks for reading all 12 of my questions out. It's a shame none of the other 120,000 shareholders bothered to ask any questions given ZIP is such an issues rich company. Why refresh the placement approval capacity? Does that suggest you are about to do another placement?

Answer: No, it's just about having maximum flexibility.